Phil Wainewright

How SaaS Is Changing Ariba

Listen to the second part of my interview with Bhaskar Himatsingka, CTO of spend management vendor Ariba. In part one, we talked about Ariba's Journey to Software as a Service, discussing how it managed the switch both financially and technologically.

In this podcast, learn how customers responded to Ariba's adoption of the SaaS model and find out how the vendor is leveraging the cloud environment to add new collaborative, benchmarking and community capabilities.

PW: In Part 1, we were talking about the re-architecting of the application to the SaaS  software-as-a-service  model. What I wanted to continue with now, Bhaskar, was to talk more about the impact of  now that you've moved across to this model  how it is affecting you as a company, what new opportunities it's opening up, how it's affecting the way that you deal with your customers? Because I think you said earlier that customers wanted to be able to implement more quickly, they wanted a more low-risk way of getting onboard with spend management, and that was one of the drivers for moving to SaaS.

BH: Hi Phil. I'll use a couple of examples. One of the things that we talk about with our analysts  when we talk about the benefits of being on-demand  a customer could start with sourcing, for example. Sourcing is typically a fairly lightweight process to implement and it takes us a couple of days. From a technology perspective, it's no time  you could turn it on at a dime  but you have to implement certain business processes, and that takes us a couple of days working with the customers to implement them.

So along the way  as they embark on their sourcing journey, and automate it, and bring it online  six months later, if they want to now actually manage their contracts within the system, it's kind of like turning on the light switch. So one benefit that being on-demand provides is, you can actually grow with your needs and implement the business processes along the way without having to bite off the whole big implementation at one time.

From an implementation  the first-time implementation perspective  obviously, all of us know that you don't have to worry about all the infrastructure and all those things that take a lot of time to put in place. You don't have to worry about how you're going to disaster-recovery the solution that you're putting in place, what kind of response times you're going to get, is it secure? All that stuff is taken care of by the SaaS vendor and what you really need to focus on is how you can encode and embed the business processes in the solution that is available to you on the Web.

So that's one way whereby it has been actually  we've seen a lot of success with regard to allowing companies to start on their spend management journey very quickly, and then expand how much of it they want to automate along the way.

And I can see that, obviously, is going to help you bring new prospects onboard. But I was just wondering, you already had a lot of existing customers and you've been encouraging them, I guess, to transition to the SaaS model too. Have you had any resistance from your current customer base?

Our current customer base actually I think has been one of the biggest assets in terms of helping us make this transition. As I mentioned in our earlier discussion, they were very supportive of our move. Some of them have still decided to stay on-premise and we are supportive of that. Time will come when more of them will decide to move  and some of them actually have moved to on-demand.

One of our largest sourcing customers, I don't know whether I can name them or not. About six months ago, they decided to move to on-demand  about a year ago decided to move the on-demand  and six months ago, they actually did transition over to on-demand. We've had, I would say probably five to ten percent of our on-premise customer base so far has decided to move to on-demand. The rest of them continue to decide whether they want to continue on-premise or whether they want to move to on-demand. I think the percentage will grow over time.

Now, one of the things that established on-premise licensed software vendors are always saying is that, well, SaaS is just a deployment choice  it's an option, but really the customer still should be able to choose between on-premise and SaaS and it really makes no difference. Whereas, I think that SaaS vendors will tend to say, well actually, there are benefits from going SaaS that you just simply can't get to, if you've got your software installed across a lot of different customer sites and you don't have the overview.

And I think this is one of the interesting elements of the multi-tenant approach that is often overlooked, because people think that well, if I just take my software and make it  put it on a virtualized platform, then I'm pretty much there with the SaaS model. I know that you've  at Ariba  you've done quite a bit with looking at the aggregate data of your customers and turning that into information that you can reflect back to customers as benchmarking.

Good point, Phil. One can view SaaS, as you said, as a collection of virtual parts, where each customer is living within their own part. But the big distinction between having these parts be behind the firewall versus being on-demand is, all of a sudden when everybody's on the same infrastructure 'in the cloud' together, now you have the ability to connect people across these parts. So a couple of examples of what  and we've started to scratch the surface in this area  a couple of examples of a few things that we've done so far.

One, spend management processes tend to be very  apart from being a lot to do with how you manage the process within your enterprise  there's a lot of interaction with your partners, especially suppliers. So one of the things that we've done now is, the supplier community is actually shared across all our customers, our buyer customers. So our supplier customers are shared across all our buyer customers. And all of a sudden, one customer is benefitting from access to the suppliers of another customer; and suppliers are benefitting because now they have access to all these buying organizations, all in the same environment. They come into meet one, and they can now start figuring out how they want to meet the others. So that's one example of how you can start bringing in new connections, or collaboration points, when everything is in the cloud.

Second, that you touched upon earlier, is benchmarking. Even though benchmarking activities can be done if you have the software behind the firewall, it's extremely cumbersome, problematic and typically close to impossible. But if you have all the data in the cloud all together, then Ariba can actually very easily and quickly aggregate data across customers, find trends amongst it, and then make it available back to the customer to see how they're actually performing compared to other vendors out there.

So a couple of places where we've done it so far is in our Spend Visibility Program where  and that solution is really targeted towards helping you understand where you have opportunities to do better sourcing and get new contracts in place. We actually  our customers who participate in that program  we take a look at their trends on their prices, as well as trends in the market, as well as trends of what our services organization does for customers who may not use our technology  and make it all available. So a customer can quickly run a report where they can say, well, I am paying only five percent less on computers this year than I was paying last year, but my peer group is paying ten percent less, and the market is actually seven percent less. So you can now start allowing people to really gain insight into how their peers are doing, which obviously makes the processes much better.

Over the next six months or a year, you'll see us actually introducing more community-like concepts which  whereby we'll allow people to also share best practices and knowledge amongst themselves.

Right. And that of course starts to give you a competitive advantage, because of the way that you're using that community, that would be very difficult for a conventional on-premise vendor to compete with.

Yeah, I don't even know  every time I think about it  I don't even know how I could envision doing it in an environment where the technology was behind the firewall. That is a core  it's a core necessity, that everybody logically be in the cloud, for one to be able to really establish that vibrant, ongoing, live community.

And the other thing, of course, is that it means that, although you're  at core, you're still dealing with software technology  you're also doing lots of other things. You're not just being a developer of software but you're also being this aggregator of information and a provider of the analytics around that information and benchmarking; and you're enabling a community where my suppliers can connect up with new customers and vice versa. And you're also, of course, providing the operations  the whole service of making sure that everybody's spend management automation is up and running and doing the job they expect from it. So you wear quite a few additional hats to simply software development don't you?

Yeah, I would  I couldn't have said it better. Many of us within Ariba instead of saying software-as-a-service, we say solution-as-a-service. It's a combination of technology, it's a combination of expertise, and then, of course, the operational aspects of making sure it's all running well together  as well as shepherding the community forward so that they're really benefitting from each other as well the technology and the services we provide.

Phil Wainewright blogs about how businesses are using the Web to get better plugged into today's fast-moving, digital economy.

Phil Wainewright

Phil Wainewright specializes in on-demand services (SaaS, PaaS and cloud), Web 2.0/Enterprise 2.0 and services architectures (SOA). He has closely observed the evolution of SaaS for more than a decade since founding the ASPnews [provide link] website in 1998. He now writes the influential ZDNet Software as Services blog and, as CEO of strategic consulting firm Procullux Ventures, advises ISVs and other industry participants on SaaS success strategies. He also founded the Loosely Coupled blog to track enterprise adoption of web services and is a member of the Enterprise Irregulars network. View more